Higher Education is an Investment

Benjamin Franklin once commented that “an investment in knowledge pays the best interest. With college graduations all around us some in our community are celebrating their children’s graduation, and some are thinking of what they should be doing to be able to provide such an opportunity to their children when the time occurs. There is no question that the knowledge one receives in higher education is an investment.

Many parents want to provide for their children’s education thinking that this will give them a better future, and the research shows that they are generally correct. The Pew Research Center released a study in February of this year showing the rising cost of not going to college. This study showed that the median income for individuals, ages 25 to 32, with a bachelor’s degree was $45,500 per year while those with a high school degree earned $28,000 annually. These numbers continue throughout a person’s working career. Unemployment rates were similarly persuasive with this same age group showing 3.8 percent unemployment for those with a bachelor’s degree and 12.2 percent unemployment for those who graduated high school.

The costs for paying for college continues to rise growing far ahead of inflation. The U.S. Labor Department conducted a study on the rising costs of college tuition, showing expenses increased 538 percent for the 28 year period from 1985 through 2013. This compares to a 286 percent escalation in medical costs and 121 percent rise in the consumer price index. Nevada has historically increased tuition at a rate slower than the rest of the country. However since 2011, our state has been picking up the pace, increasing by 11.99 percent in the 2013-2014 school year.

While the value of education in clear to see, it is often challenging to figure out how to set aside sufficient funds to pay for your children’s education and still manage all of the other financial challenges that parents must shoulder. To begin your family’s process of paying for college it is helpful to have an idea what the costs are for a college your child might attend. Plugging the numbers into a college cost calculator, will show you what you will need to save per month or per year to reach your goal of paying for part or all of the investment in higher education. The Nevada Prepaid Tuition program offers a fairly manageable option where parents currently can set aside $179 per month for 207 months (17.25 years) starting when their child is under one year old in order to have four years of University of Nevada tuition paid. This program is available until June 30, 2014 and only for children under one year of age; older children can enroll December 1 through February 28 and will have different costs.

There is not one right answer to the riddle of how to save for college. There are different vehicles that help, but none of the choices are simple and all of the options involve sacrificing some of what you and your family may enjoy today for long-term rewards. Investing in education may, as Benjamin Franklin suggested so many years ago, pay the best interest.

Heidi Foster, CFP® Wealth Advisor and Investment Manager with American Wealth Management and may be reached at 775.332.7000 or heidi@ﬁnancialhealth.com. Securities offered through Foothill Securities, Inc. member FINRA/SIPC. Investment advice offered through American Wealth Management, a registered investment advisor and a separate entity from Foothill Securities, Inc. This information should not be construed as investment, tax or legal advice. The author is not engaged in rendering legal, accounting or other professional services. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. If assistance or further information is needed, the reader is advised to engage the services of a competent professional.